Are you wondering whether the software development companies in the UK that you spoke with for your project may suddenly increase their charges before you make a decision? Or are you feeling that you can’t afford the technology that you really need to keep your business competitive? The UK is currently facing a cost of living crisis, with inflation among the highest in 40 years. This is having a significant impact on businesses of all sizes, including software development companies, which is why you may be facing this situation. But there is always a solution to the challenge of affordability in software development costs.
Statistics on the Cost of Living Crisis in the UK:
According to a number of reports the cost of living crisis in the UK has reached a peak this year in 2023. The combination of a number of factors have proven debilitating, putting the country into a worse situation than what was predicted previously. And key to this was the inflation rate.
The UK inflation rate reached its highest level in 40 years with the inflation rate (Consumer Price Index – CPI – 12 month rate) reaching 11.1% in October 2022, with a gradual reduction to 6.7% in August 2023 this year, according to the August 2023 Inflation Report of the Office for National Statistics in the UK. Despite the reduction the impact continues to be huge.
Further statistics in the same report showed that the Consumer Prices Index including Housing costs (CPIH) rose by 6.3% in the 12 months to August 2023. In addition normal food and non-alcoholic beverages still had the highest 12 month inflation rate of 13.6% as at August 2023.
While this has reduced in comparison to the March report that showed an inflation of 19.2%, it is important to take note that this is the change in the inflation rate, and not the price in itself. This means that UK citizens are now facing drastic increases in basic necessities that they would never have expected a year ago.
However this was not the limit of the price hikes. The House of Commons Library recorded that there was a rise in energy bills by 54% in April 2022 and a further 27% in October 2022. While costs fell slightly in July 2023 due to a fall in wholesale prices they continued to be far above their pre-2022 rates.
Moreover, businesses, being not protected by the price cap on energy bills that domestic consumers had, faced even larger increases in their energy bills affecting their economic viability severely and causing them to transfer the price increases to their customers. The cycle has caused further economic problems in terms of living costs.
Meanwhile the UK government released an Energy Bill Relief Scheme as of September 2023, the effects of which is still to be seen – especially in light of the reports that even household energy bills are expected to soar to £1900 an year in the coldest months according to the Guardian.
According to unverified reports there are currently over a million children in the UK who are being forced to sleep on the floor or share beds with their parents due to lack of economic facilities to buy new beds or replace broken ones. On the business end, many companies are downsizing as people continue to lose their jobs daily.
In such a situation it is important to understand the long term consequences of this economic crisis and take steps to mitigate it in order to ensure that your business remains healthy in the long term.
What are the consequences of the cost of living crisis in the UK?
The cost of living crisis in the UK is having a number of negative consequences, including:
- Poverty and inequality: The cost of living crisis is pushing more people into poverty and widening the gap between the rich and the poor. As per the Joseph Rowntree Foundation’s UK Poverty 2023 Report, one in five people, that is 13.4 million people in the UK, were living below the poverty line as at 2020/2021, and they expected the numbers to worsen severely in 2022/2023 in light of the extreme inflation rates.
- Food insecurity: The cost of food has risen significantly in recent months, making it difficult for many people to afford to eat a healthy diet. According to Joseph Rowntree Foundation, as of Summer 2023, 5.5 million low-income households have had to cut down on or skip meals because they can’t afford food.
- Debt and financial hardship: Many people are struggling to keep up with their bills and are taking on more debt. According to the Money Charity, the average UK household debt is now £65,661. Meanwhile, people in the UK owed £1,843.8 billion of debt in total as at the end of July 2023, which is a £37.3 billion increase from July 2022.
- Mental and physical health problems. The cost of living crisis is causing stress and anxiety for many people, which has led to increased mental health problems. According to a report by PersonnelToday, over a fifth of UK adults (21%) are in emotional distress and another 26% feel an absence of positive wellbeing. This has caused a loss of 23.3 million working days for businesses due to stress, burnout and general poor mental health among their employees, while costing the economy £28bn a year. Notedly, nearly one in two people (46%) have remarked that they are being affected heavily mentally by the cost of living crisis.
The cost of living crisis is a serious problem that is having a significant impact on people’s lives. It is important to be aware of the consequences of the crisis and to take steps to protect yourself and your loved ones.
The Impact of the Price Hikes on Software Development
The cost of software development is already high in the UK, and the cost of living crisis is making it even more expensive. According to multiple sources the cost of software development in the UK for the year of 2023 can range from £10,000 for a very basic app to over £1,000,000 for complex modern technology systems.
This is a significant cost for businesses, and it is becoming increasingly difficult to justify. As a result, many businesses are looking for ways to reduce their software development costs.
How to Reduce Software Development Costs?
There are a number of ways to reduce software development costs, including:
- Using open source software: Open source software is free to use and distribute. There are many high-quality open source software options available for a variety of tasks. For example, businesses can use open source software to build their websites, develop their mobile apps, and manage their infrastructure. However, they cannot be used directly, and instead still need to be customized to fit business needs and to fill any security gaps.
- Negotiate with software vendors. Software vendors are often willing to negotiate on price, especially if you are willing to commit to a long-term contract. You can also try to negotiate on other terms, such as the level of support you receive or the payment terms. Some software vendors (such as Era Biz) also customize their base software and offer white labeled versions of their software.
- Outsource development tasks to lower-cost countries. There are many countries, such as the little South Asian country of Sri Lanka, where the cost of software development is much lower than in the UK while still maintaining high quality and delivery standards. However, it is important to choose an IT Outsourcing company carefully and to make sure that they are reliable and flexible enough for your needs. It is also important to consider the communication availability due cultural differences and the time zone difference when outsourcing software development tasks.
- Automate development tasks. There are many tools available that can help you to automate development tasks, such as unit testing, code review, and deployment. This can free up your developers to focus on more complex tasks and can help to reduce your costs. While such automation may cause a significant cost at the development stage due to the higher end technologies involved, the cost saving at scale afterwards fully justifies the expense, especially for larger projects.
- Invest in training for your developers. Well-trained developers are more productive and can help you to produce high-quality software more quickly. Investing in training for your developers can help you to reduce your overall development costs. Alternatively you can hire dedicated developers who are already well-trained and highly experienced. As you will only be paying for the time they work and not for any other employee benefits or training costs, you can reduce the expenses of development extensively.
Additional tips for reducing software development costs during the cost of living crisis
In addition to the above, here are some additional tips for reducing software development costs during the living cost crisis:
- Use a project management tool to track your progress and budget. This will help you to stay on track and to avoid surprises.
- Set clear goals and expectations for your developers. Segregate larger tasks into smaller ones with well-defined deadlines. This will help to ensure that they are working on the right things and that they are meeting your deadlines.
- Communicate regularly with your developers. This will help to avoid misunderstandings and to ensure that everyone is on the same page. This will also let you know where your development is at all times, ensuring you that the developers are not wasting your valuable funds
- Be flexible and willing to change your plans if necessary. Things don’t always go according to plan, so it’s important to be flexible and willing to adapt your plans as needed when facing challenges.
- Most importantly, don’t be unstable in your design decisions. This is a common problem as many business owners want to add on new features as they come across them halfway through development. This not only doubles the workload but also can increase your costs extensively. Make design decisions carefully and stick to your initial design
- Consider using a low-code/no-code platform. Low-code/no-code platforms can help businesses to develop software applications without having to write any code. This can be a good option for businesses with limited budgets or that do not have in-house software development expertise.
- Look for government grants and subsidies. There are a number of government grants and subsidies available to businesses that are developing software. These grants and subsidies can help to reduce the cost of software development.
- Partner with other businesses. If you are developing a software application that is similar to what other businesses are developing, you may be able to partner with those businesses to share the cost of development.
By considering all of these tips and options, businesses can reduce their software development costs during the cost of living crisis.
Conclusion
The current cost of living crisis may be here to stay for a while at least, and for businesses this means finding ways to live with it. The key way to do this is to reduce unnecessary costs and manage those that you can’t eliminate. As technology is a necessity, so is software development. By following the tips above, businesses can reduce their software development costs through open source software, software vendor negotiations, IT outsourcing to lower cost countries like Sri Lanka, automation of development, and investment in training or in fully trained dedicated developers. This can help businesses to remain competitive and to protect their profits.
